Evansville Eastside Buy & Hold Investment

[Marc Hoeppner]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $100,000
Cash invested: $20,000

Bought as a package deal with another duplex on the near north side of Evansville. This building was vacant at the time of closing. Previous owner had it rented for $450 & $550 a month per side. With minimal renovation, market rent for the units is $700 & $750 a month per side, so I'll have a $450 swing in monthly revenue right away.

What made you interested in investing in this type of deal?

I have been looking to add more small multifamily units to my portfolio, so it was great timing. The cashflow for this property combined with the other included in the package was nearly $1,500 per month, so the numbers worked out very well.

How did you find this deal and how did you negotiate it?

The seller approached me off-market and offered the deal to me. We negotiated the price on the other duplex, but I paid him his full asking price of $100,000 for this building.

How did you finance this deal?

I used a local bank and obtained a commercial real estate loan. I had to put 20% down.

How did you add value to the deal?

With minimal clean up, this building was already under market value based off of sales comparable as well as the cashflow numbers. By buying it off market, I avoided overpaying in the competitive open market on the MLS.

What was the outcome?

The bank appraised this building at $30,000 over purchase price, so I have immediate bonus equity in the deal.

Lessons learned? Challenges?

With current rents rising substantially in recent months/years, the old purchase price comparison for this type of property can't be used to determine if it's a good deal or not. It's absolutely necessary to look at each deal individually and determine if the numbers work or not.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Matt Whetstone at First Bank